Gambling

Financial repression "is going on on several fronts conducted by different people for their own agendas, though they all seem to be mutually supporting... There is a lot of collusion - the cancer which started in the US Financial System has spread globally... You now have two parties with the same head and reporting to the same masters. There is no longer any countervailing power."

Government mandated fiat currency simply does not work in the long run. We have empirical evidence galore – every fiat currency system in history has failed, except the current one, which has not failed yet. The modern fiat money system is more ingeniously designed than its historical predecessors and has a far greater amount of accumulated real wealth to draw sustenance from, so it seems likely that it will be relatively long-lived as far as fiat money systems go. In a truly free market, fiat money would never come into existence though. Greenspan was wrong – government bureaucrats cannot create something “as good as gold” by decree.

The trouble with the money printing madness in the Eccles Building is that it generates huge deformations, misallocations and speculative excesses in the financial markets. Eventually these bubbles splatter, as they have twice this century.  The resulting carnage, needless to say, is not small. Combined financial and real estate asset markdowns totaled about $7 trillion after the dotcom bust and $15 trillion during the 2008-2009 financial crisis. The Wall Street casino is now festooned with giant deadweight losses waiting to happen. But perhaps none is more egregious than Tesla - a crony capitalist con job that has long been insolvent, and has survived only by dint of prodigious taxpayer subsidies and billions of free money from the Fed’s Wall Street casino.

When a member of the New York Fed staff releases a paper on the topic of Anxiety, Overconfidence, and Excessive Risk Taking, and in which there is a section on "Self-Manipulation with Alcohol and Drugs", which explains that "pathological gambling is more common among people with alcohol use disorders," adds that "there is evidence that drugs are used strategically to induce performance changes, and particularly so for individuals with greater degrees of horizon-dependent  risk aversion", observes that 'Anecdotal evidence on the “widespread use of [...] cocaine by professional traders” is consistent both with strategic self-manipulation and with our observations about cross-sectional overconfidence across environments", and finally recommends to all the risk-averse BTFDers and BTFATHers, that "the performance of anxiety-prone individuals should then improve with moderate levels of drug-induced overconfidence"one should probably listen and trade - since the Fed's only remaining wealth effect and "monetary transmission channel" is to BTFATH - while both drunk and high.

"...there seems to have been a shift from using derivatives as a hedging tool, to using them more for alpha generation [as] most products are now used more for adding risk and directional views."

ZIRP forces retirees and the baby boomers to become more frugal based on lower interest income... this is DEFLATIONARY and has crippled consumer spending.

China’s stock market is on fire but its economy is cooling off.  Can the divergence last? And what’s next for China? Stay tuned to find out.

What neither the Saudis, nor the US shale companies, and certainly not their investors, who lately seem to get their investment advice from the Cartoon Network, know is even if every last US shale company is Friendo'ed, there is an even more insidious group of drillers and oil extractors waiting behind them, backed by an even greater monetary bubble and an even more clueless group of sources of cash, just waiting to step in and become the next marginal oil producer.

China.

With the ECB escalating matters this afternoon, the craziness of European leaders talking past one another in an effort to create the next headline-driven narrative continued to gather pace today. That idiocy was nowhere more obvious than when EU President Martin Schulz warned ominously that Greece risks national bankruptcy if it continues down the path of non-agreement when Greek finance minister Yanis Varoufakis has previously explained quite clearly that "Greece is already bankrupt."

The US, like western Europe, is in the midst of a massive failure of its brand of capitalism. There are no free markets, no price discovery, there are asset bubbles being blown with money that belongs to our grandchildren as people are thrown into despair, while others attain unparalleled riches, and the whole grossly distorted movie is fed to everyone by a well-oiled spin machine. Yes, 40 million Americans are on food stamps, 100 million are not even officially in the labor force, and perhaps as much as most Americans are receiving some sort of government assistance, but that doesn’t make it socialism. It makes it a failed capitalist system. Socialism is supposed to be about a society that cares, and that’s not what those US government handouts are about. They’re about keeping people quiet in a failed system.

On the heels of worse than expected Manufacturing PMIs (both indicating economic contraction) and the "taking away" of Minsheng Bank's CEO in a clear signal that the corruption probe is refocusing on the banking industry, Chinese stocks and currency are tumbling. Retail investors dreams are going up in smoke as the Shanghai Composite suffers its biggest 3-week loss in over a year and tumbles to a 3.8% loss year-to-date - not what the gambling 'investors' were expecting. But perhaps more worryingly for Chinese officials is the continued selling pressure on the Yuan - now at a record 1.94% discount to PBOC's fixing - very close to forcing intervention of decision time on a wider peg-band or even more free-floating currency.

Rather than be a problem, Syriza may well be a solution, if it plays its cards right, but that still leaves politicians and investors denominating Tsipras et al as a problem, if not a menace. The world’s major banks got rich off the back of the Greek population at large, and when their wagers got so absurd they collapsed, the banks saw to it that their losses were transferred to European -and American – taxpayers. And those taxpayers are now told to vent their anger at 'those cheating, lazy Greeks'. The Troika, the EU, the IMF, and the banks whose sock puppets they have chosen to be, are a predatory force that has come a long way towards wiping Greece off the map. And that’s what Syriza has set out to remediate. And for that, they deserve, and probably will need, our unmitigated support.

You've probably seen articles and adverts discussing how much money you'll need to "retire comfortably." The trick of course is the definition of comfortable. The general idea of comfortable (as I understand it) appears to be an income which enables the retiree to enjoy leisurely vacations on cruise ships, own a well-appointed RV for tooling around the countryside, and spend as much time on the golf links as he/she might want. Needless to say, Social Security isn't going to fund a comfortable retirement, unless the definition is watching TV with an box of kibble to snack on. By this definition of retiring comfortably, I reckon I should be able to retire at age 91--assuming I can work another 30 years and the creek don't rise.

At the end of the day, there is nothing behind the curtain at the Eccles Building except for the specious doctrine of wealth effects. Fractional changes in the money market rate are of relevance only to the day traders and robo machines which occupy the casino. Fed policy is designed to keep them dancing. It rests on the delusional hope that the drug of ZIRP or near-ZIRP can keep the stock market averages rising and a trickle down of extra spending by the wealthy flowing into the reported GDP and job numbers. History proves beyond a shadow of doubt that bubbles fueled by bad money ultimately splatter into a world of harm. The Fed is not only ignoring the coming storm, but is actually fueling its intensity with malice of forethought.

• Who Doubts Yellen's Policies? Summers for One (BBG)
• Samsung, Apple Back in Dead Heat for Global Smartphone Dominance (WSJ)
• Islamic State purportedly sets new deadline for hostage swap (Reuters)
• Turkey's $7.9 Billion Mystery Money That's Simply Vanished (BBG)
• How a Two-Tier Economy Is Reshaping the U.S. Marketplace (WSJ)
• U.S. Prisons Grapple With Aging Population (WSJ)
• Hasenstab Sees $3 Billion Vanish in Ukraine as One Big Bet Sours (BBG) - maybe he should BTFD, pardon, "invest" in Belarus next?
• Belarus May Seek Debt Restructuring in 2015, President Says (BBG)